High-Frequency Trading around Large Institutional Orders

Vincent van Kervel and Albert Menkveld

No 17-092/IV, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Liquidity suppliers lean against the wind. We analyze whether high-frequency traders (HFTs) lean against large institutional orders that execute through a series of child orders. The alternative is HFTs trading "with the wind," that is, in the same direction. We find that HFTs initially lean against these orders but eventually change direction and take position in the same direction for the most informed institutional orders. Our empirical findings are consistent with investors trading strategically on their information. When deciding trade intensity, they seem to trade off higher speculative profit against higher risk of detection by HFTs and being preyed on.

Keywords: High-frequency traders; institutional investors; trading patterns; transaction cost (search for similar items in EconPapers)
JEL-codes: G10 G14 G15 (search for similar items in EconPapers)
Date: 2017-09-29
New Economics Papers: this item is included in nep-fmk and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: High‐Frequency Trading around Large Institutional Orders (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20170092

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